Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Wallstreet Cheerleaders Will Eventually Face Reality

Stock-Markets / Corporate Earnings Jun 25, 2008 - 05:55 PM GMT

By: John_Browne

Stock-Markets When listening to the typical, television-based, Wall Street cheerleader work themselves up into a bull market frenzy, one is tempted to wonder if they ever bother to compare the movie that is rolling along in their heads to the one that is occurring in the outside world. Perhaps for those living in a media bubble, the only reality that matters is the one reflected in the camera lens.


Over the past nine months, we have seen increasing signs of economic contraction and falling corporate earnings in America.  Although the financials, airlines, auto manufacturers, and retailers have grabbed the headlines, few American sectors are immune from the pain. Meanwhile, the cheerleaders and market pundits have advised that recession fears are overblown and that investors should buy ”unnecessarily” beaten down American stocks.  Their advice is founded on some shallow mantras.

We have all heard the droning:

“If you exclude the sub-prime, or the financials, things look good.”

“If you strip out food and energy, inflation is not a problem.”

“You can never underestimate the resilience of the American consumer.”

 “The earnings are way down, but the earnings are above Wall Street estimates!”

The cry that “stocks are cheap” has been repeated almost daily.  But surely, the price of any item is only cheap when the outlook is for the price to rise, not just because it has eroded. Investors who heeded such advice to buy the financials have been crucified.

When faced with news of an unassailably bad character, we often see the pundits' smile as they assure us that the depths confirm that recovery is nigh.

While the Dow Jones Industrials have slid nearly 17% since its October 2007 highs, they have consistently presented us with a series of occasions in which the “market bottom” has been proclaimed.  Nevertheless, stocks have continued to slide.  Don't look now, but it appears that Toyota looks set to replace GM as America's leading auto seller.

In an effort to reduce the public's fear of inflation, cheerleaders have cited a reduced money supply.  They make no mention of the way banks and derivatives have leveraged the money supply or the fact that the Fed no longer publishes M3 (the most widely recognized measure of money supply).  While prices gallop out of control for tangible items in the real world, the cheerleaders point to the narrow yield spread shown by Treasury Inflation Protected Securities over classic U.S. Treasuries (TIPS Spread).  They ignore that the TIPS spread is a wholly manipulated creation of the “politically cooked” CPI inflation figures.

While the U.S. government has successfully hidden domestic inflation, the grossly debased U.S. dollar has exported inflation abroad to dollar surplus nations.  Today, Europe is experiencing 3.5% inflation, China 6.7%, India 7.5% and Saudi Arabia more than 10%.  Yet all of the cheerleaders proclaim that inflation fears are unfounded. 

The latest Case-Schiller index shows a fall of 15.3 percent in U.S. house prices.  The magnitude of the drop can be appreciated when it is applied to the $23 trillion total value of U.S. housing stock.  Doing so reveals that $3.52 trillion of the paper wealth has evaporated.  This inconceivably vast figure dwarfs the $175 billion stimulus package in which the government and Wall Street cheerleaders have place so much hope.

In announcing “no change” in rates today, the Fed pretends that its policy is perfectly calibrated to deal with the current economy.  In reality however, the Fed is pinned down by a cross fire of inflation and recession.  They see their best move as keeping their heads down and hoping that they emerge unscathed.  Perhaps Alan Greenspan's best move as Fed Chairman was getting out when he did.

The reality is that America is faced by stagflation, economic recession and financial inflation at the same time!  Rank and file American investors are beginning to understand this.  As a result, U.S. stock markets are looking decidedly nervous.  The possibility exists for major falls in the months and years ahead.  However, don't look for anyone on television to tell you this.  They are too busy shaking their pom poms. 

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.” Click here to order a copy today.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in